Fed chief presses Congress

JACKSON HOLE, Wyo. —Federal Reserve Chairman Ben Bernanke on Friday leaned on Congress to do more to promote hiring and growth, or risk delaying the economy's return to full health.

Bernanke proposed no new steps by the Fed to boost the economy. But at a time when Congress has been focused on shrinking long-running budget deficits, he warned lawmakers not to "disregard the fragility of the current economic recovery."

Bernanke, who spoke at an annual economic conference in Jackson Hole, left open the possibility that the Fed will take additional steps to strengthen the economy. He said its September policy meeting will be held over two days, instead of just one, to allow for a "fuller discussion."

But analysts said the speech provided no assurances of any new help from the Fed.

"He appears to be saying that the Fed has largely played its part and that the politicians need to step up their game," said Paul Dales, senior U.S. economist at Capital Economics.

Stocks fell after the speech was released but then recovered.

Some economists worry that Europe's financial crisis, along with persistently weak U.S. job growth and falling home prices, could tip the economy into another recession. Those fears have pulled down stock prices in the past month. The Dow Jones industrial average has lost 12 percent of its value since late July.

The sell-off on Wall Street was triggered by Congress' battle over raising the debt ceiling. In his speech, Bernanke criticized lawmakers for their handling of the issue and warned that further standoffs could hurt the economy in the long run.

A plan Congress passed this month is expected to reduce annual deficits by $3.3 trillion over the next decade through spending cuts.

Bernanke said that long-term deficit reduction is necessary but that future economic health could be jeopardized if hiring and growth are not strengthened now.

Analysts noted the lack of new proposals in Bernanke's speech. But Aneta Markowska, senior U.S. economist at Societe Generale, said the extension of the Fed's September meeting to two days might suggest something new could be unveiled.

Many have looked with anticipation to the Fed to do more. It has already kept short-term interest rates near zero for 2 1/2 years. And this month, it said it would keep them there through mid-2013.

"I'm a little fearful that there are a lot of expectations built in that I don't think Bernanke can deliver on," said Jack Ablin, chief investment officer at Harris Private Bank.

To promote growth, Bernanke said the government must pursue tax, trade and regulatory policies that encourage economic health.

The approach of this year's Jackson Hole conference raised expectations. In last year's speech, Bernanke signaled that the Fed might unveil a Treasury-buying plan to help lower long-term rates. In November, the Fed announced a $600 billion bond purchase program, intended to lower long-term rates, lift stock prices and spur more spending.

Immediately afterward, stock prices started rising and continued up until May, when they leveled out.

Still, critics, from congressional Republicans to some Fed officials, have raised concerns that the Fed's Treasury purchases could ignite inflation and speculative buying on Wall Street, while doing little to aid the economy.

Others have wondered whether any further lowering of long-term rates is needed. Investors seeking the safety of U.S. debt have forced down the yield on the 10-year Treasury note to 2.19 percent — a full point lower than it was when the Fed completed its Treasury purchases about two months ago. Yet the economy is still sputtering.